Margins Narrow Between Packers, Feeders

The profit margin spread between packers and feedyards has shifted more than $320 per head since last June.
( Greg Henderson )

The profit margin spread between packers and feeders has narrowed. With feedyards averaging a $77 per head profit and packers at $107 per head, the spread stood at $30. That’s a shift of more than $320 per head from last June, according to the Sterling Beef Profit Tracker.

Beef packers saw average profits of $285 per head in June of 2018 while cattle feeders lost an average of $70 on every animal shipped.

For the week ending Jan. 4, feedyard closeout profits declined $26 per head to $77 on cash prices that held steady at $123. Packer margins slipped $29 for the week to $107. The beef cutout improved nearly $1 per cwt. for the week to $214.81 per cwt. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

A year ago cattle feeders were earning an average of $83 per head. Feeder cattle represent 71% of the cost of finishing a steer compared with 73% a year ago.

Farrow-to-finish pork producers saw their margins improve $8 per head, but still saw losses of $18. Lean carcass prices traded at $48.94 per cwt., $2.40 per cwt. better than the previous week, but $2.22 lower than a month ago. A year ago pork producer margins were a positive $15 per head. Pork packer margins averaged a profit of $35 per head last week.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2018 will average $162 per cow. That would be steady compared to the $164 estimated average profit for 2017. Estimated average cow-calf margins were $176 in 2016, and $438 per cow in 2015.

For feedyards, Nalivka projects an average profit of $41 per head in 2019, which would be $17 better than the average of $24 per head in 2018. Nalivka expects packer margins to average about $159 per head in 2019, about $10 less than in 2018.

For farrow-to-finish pork producers, Nalivka projects an average loss of $2 pere head in 2019, as compared with an average profit of $1 per head in 2018. Pork packers are projected to earn $22 per head in 2019, about $2 more than the $20 per head profits of 2018.